Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 88163 

22 15 U.S.C. 78s(b)(3)(A). 

23 17 CFR 240.19b–4(f). 

24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(i). 

4 17 CFR 240.19b–4(f)(1). 

5OCC’s By-Laws and Rules can be found on 

OCC’s public website: https://www.theocc.com/ 

Company-Information/Documents-and-Archives/ 

By-Laws-and-Rules. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 22 and paragraph (f) of Rule 

19b–4 23 thereunder. At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CboeEDGX–2023–075 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–CboeEDGX–2023–075. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeEDGX–2023–075 and should be 

submitted on or before January 10, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–27919 Filed 12–19–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99169; File No. SR–OCC– 

2023–008] 

Self-Regulatory Organizations; the 

Options Clearing Corporation; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change Concerning 

Amendments to the Options Clearing 

Corporation’s Collateral Risk 

Management Policy and Margin Policy 

December 14, 2023. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on December 4, 2023, The 

Options Clearing Corporation (‘‘OCC’’ or 

‘‘Corporation’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared primarily by OCC. OCC filed 

the proposed rule change pursuant to 

Section 19(b)(3)(A)(i) 3 of the Act and 

Rule 19b–4(f)(1) 4 thereunder, such that 

the proposed rule change was 

immediately effective upon filing with 

the Commission. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

This proposed rule change would 

amend OCC’s Collateral Risk 

Management Policy (‘‘CRM Policy’’) and 

Margin Policy (collectively, ‘‘OCC 

Policies’’). The proposed changes are 

designed to update the OCC Policies to 

better align the descriptions therein 

with OCC’s current practices, delete 

extraneous information, and make other 

non-substantive clarifying, conforming 

and administrative changes. 

The proposed changes to the OCC 

Policies are included in confidential 

Exhibits 5A and 5B to File No. SR– 

OCC–2023–008. Material proposed to be 

added to the OCC Policies as currently 

in effect is underlined and material 

proposed to be deleted is marked in 

strikethrough text. All capitalized terms 

not defined herein have the same 

meaning as set forth in the OCC ByLaws and Rules.5

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

As the sole clearing agency for 

standardized equity options listed on 

national securities exchanges registered 

with the Commission (‘‘listed options’’), 

OCC is exposed to certain risks, 

including credit risk arising from its 

relationships with the Clearing 

Members for which OCC becomes the 

buyer to every seller and the seller to 

ever buyer with respect to listed 

options. In order to manage 

counterparty credit risk and mitigate 

related systemic risks, OCC requires 

Clearing Members to collateralize 

financial obligations that result from 

maintaining options, futures and stock 

loan positions at OCC. 

OCC maintains policies filed with the 

Commission as OCC rules that are 

designed to address such credit risk, 


ddrumheller on DSK120RN23PROD with NOTICES1
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6See Exchange Act Release No. 82311 (Dec. 13, 

2017), 82 FR 60252, 60252–53 (Dec. 19, 2017) (SR– 

OCC–2017–008). 

7See id. 

8See id. at 60253. 

9See Exchange Act Release No. 82658 (Feb. 7, 

2018), 83 FR 6646, 6646 (Feb. 14, 2018) (SR–OCC– 

2017–007). 

10See id. at 6647. 

11See 17 CFR 240.17Ad–22(e)(3)(i) (requiring, 

among other things, that a covered clearing agency 

subject its risk management policies, procedures 

and systems to review on a specified periodic basis 

and approval by the board of directors annually). 

12See Committee on Payment and Settlement 

Systems and Technical Committee of the 

International Organization of Securities 

Commissions (‘‘CPSS–IOSCO’’), Principles for 

financial market infrastructures (Apr. 16, 2012) 

(stating that ‘‘[a]n FMI should use a collateral 

management system that is well-designed and 

operationally flexible’’), available at http://

www.bis.org/publ/cpss101a.pdf. In 2014, the CPSS 

became the Committee on Payments and Market 

Infrastructures (‘‘CPMI’’). 

13See Exchange Act Release No. 93916 (Jan. 6, 

2022), 87 FR 1819, 1820 (Jan. 12, 2022) (SR–OCC– 

2021–014) (discussing the applicability and scope 

of OCC’s Cash and Investment Management Policy). 

14See 17 CFR 240.17Ad-22(e)(5). 

15For example, the CRM Policy explains that 

OCC’s approach to valuation includes that the 

maximum period between collateral revaluations is 

at least daily. See Exchange Act Release No. 82009 

(Nov. 3, 2017), 82 FR 52079, 52080–81 (Nov. 9, 

2017) (SR–OCC–2017–008). 

including the CRM Policy and the 

Margin Policy. The CRM Policy 

identifies OCC’s approach for managing 

the risks associated with accepting 

collateral deposits.6 Specifically, the 

CRM Policy sets the governance 

processes for establishing and 

maintaining standards used to 

determine acceptable forms of collateral, 

as well as the methodology for 

establishing the valuation practices, 

including applicable haircuts and 

concentration limits to effectively 

manage OCC’s credit exposure.7 In 

addition, the CRM Policy describes the 

requirements for periodically evaluating 

the forms of accepted collateral and the 

ongoing adequacy of the valuation 

processes.8 The Margin Policy describes 

OCC’s approach to managing credit 

exposure presented by its Clearing 

Members by requiring Clearing 

Members to deposit margin, which OCC 

would use to cover losses if a member 

defaults.9 The Margin Policy addresses 

positions considered for margin 

calculations, cross-margining, treatment 

of collateral included in margin 

calculations, key margin assumptions, 

OCC’s margin methodologies, protocols 

for margin calls and adjustments, and 

margin monitoring, including through 

daily backtesting and model validation 

that OCC conducts to assess the 

performance of its margin 

methodologies.10

Consistent with regulatory 

obligations,11 OCC and its Board 

reviews these risk management policies 

at least annually. Through these annual 

reviews, OCC has identified proposed 

revisions intended to revise certain 

descriptions to better reflect current 

practices, remove extraneous 

information and make other nonsubstantive, clarifying and 

administrative changes to the text of 

those policies. These changes are 

designed to enhance the clarity of OCC’s 

internal governance arrangements and 

are not expected to have any impact on 

OCC’s Clearing Members or other 

market participants. 

(1) Purpose 

OCC proposes to make the following 

changes to the CRM Policy and Margin 

Policy to better reflect current practices, 

remove extraneous information and 

make other non-substantive, clarifying 

and administrative changes to the text of 

those policies. 

1. CRM Policy 

OCC proposes to add a statement in 

the Purpose section that the CRM Policy 

sets forth processes to establish and 

maintain standards used to ‘‘maintain a 

collateral system that is well-designed 

and operationally flexible.’’ OCC’s 

Collateral Management system meets 

this standard today and no changes to 

its operations would be required. The 

proposed revision would merely clarify 

that OCC’s collateral system conforms to 

the standard established at Principle 5, 

Key Consideration 6 of the Principles 

for Financial Market Infrastructures.12

OCC proposes to insert an 

Applicability and Scope section that, 

consistent with other recently filed 

policies,13 would identify the primary 

OCC business units that support OCC’s 

approach to managing the risks 

associated with accepting collateral 

deposits, including but not limited to 

Pricing and Margins (‘‘P&M’’), Collateral 

Services, and Quantitative Risk 

Management (‘‘QRM’’). 

OCC proposes to retitle the Policy 

Detail section as the Policy Content 

section to conform with current OCC 

titling conventions as reflected in other 

policies. OCC also proposes to amend a 

statement therein that Clearing Members 

must maintain sufficient collateral at 

OCC to meet their margin and clearing 

fund obligations ‘‘at all times.’’ OCC 

proposes to remove this phrase that 

could imply that a Clearing Member’s 

failure to maintain sufficient collateral 

would constitute a violation of OCC’s 

Rules (i.e., if the value of the collateral 

on deposit fell below the Clearing 

Member’s margin requirement). Such a 

reading would be inconsistent with OCC 

operations and the implicit intent 

behind OCC Rules 601 and 1001, which 

establish OCC’s ability to call for margin 

and Clearing Fund collateral as needed. 

The revised statement would better 

describe OCC’s long-standing 

requirements and practices. 

OCC proposes to remove lists of 

acceptable margin and Clearing Fund 

collateral types from the Margin and 

Clearing Fund sections. OCC Rules 604 

and 610 describe asset types that OCC 

accepts as margin collateral and OCC 

Rule 1002 describes Clearing Fund 

collateral. Because the list of acceptable 

collateral to be removed is appropriately 

reflected in the Rulebook, it need not be 

duplicated in the CRM Policy. 

Similarly, OCC proposes to delete a 

statement regarding the current 

composition of sovereign debt accepted 

by OCC in the Sovereign Credit Risk 

section. This text provides background 

information regarding the current 

composition of OCC’s sovereign debt 

collateral and maintaining this 

description in the CRM Policy text 

raises the risk of inaccuracy should 

OCC’s collateral composition change 

over time. The statement does not 

establish a stated policy, practice or 

interpretation of OCC regarding the 

forms of Government securities 

acceptable to OCC, which are 

established by OCC Rules 604 and 1002. 

OCC proposes to restate Financial 

Risk Management’s (‘‘FRM’’) stated 

obligation in the Market Risk section to 

value collateral ‘‘continuously,’’ to 

‘‘throughout regular market trading 

hours.’’ The modifier ‘‘continuously’’ 

could imply that FRM is required to 

value collateral on a 24/7 basis. OCC’s 

policies and procedures are designed to 

set and enforce appropriately 

conservative haircuts for the collateral it 

accepts,14 but OCC does not believe this 

would require it to adhere to a standard 

of continuous and ongoing revaluation 

of collateral. Accordingly, OCC 

proposes these revisions to more clearly 

reflect its long-standing practices. 

Similarly, OCC proposes to restate the 

obligation in the Valuations section 

from requiring P&M to perform its 

collateral valuation processes ‘‘on a 

continuous basis’’ to ‘‘during regular 

market trading hours.’’ In each case the 

revised statements are fairly and 

reasonably implied by OCC’s rules.15

OCC proposes to amend the 

description of its approach to 

concentration risk in the Concentration 

Risk section. The current description 

focuses on OCC’s measures to mitigate 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 88165 

16See Exchange Act Release No. 79094 (Oct. 13, 

2016), 81 FR 72129 (Oct. 19, 2016) (SR–OCC–2016– 

009) (approving changes to OCC’s escrow deposit 

program). 

17 Id. at 72129. 

concentration risk in relatively limited 

scenarios, including where appropriate 

to limit the aggregation or concentration 

of large positions in a single security or 

mitigate price dislocation when selling 

a large position into a thin market. This 

description does not address other 

relevant instances where OCC could 

face or seek to mitigate concentration 

risk. As such, OCC proposes to more 

broadly describe its approach to 

mitigating concentration risk, which 

consists of restrictions for certain assets 

intended to allow OCC to liquidate 

collateral quickly without adverse price 

effects. The proposed revisions would 

more fully describe OCC’s approach to 

mitigating concentration risk without 

altering the substance or requirements 

of the CRM Policy as they relate to 

OCC’s core risk management activities. 

The Systems and Processing section 

describes OCC’s collateral management 

system as highly automated yet flexible 

enough to accept a variety of collateral 

types. While this description of the 

system’s flexibility is accurate, it does 

not establish a rule, standard or 

interpretation with respect to OCC’s 

operation of the system. OCC proposes 

to replace the extraneous discussion of 

flexibility with a statement indicating 

that the system supports the 

maintenance and processing of various 

asset types, which more objectively 

conveys similar information. This 

section further provides that the 

collateral management system maintains 

the same performance, efficiency and 

effectiveness for each collateral type 

OCC accepts. OCC proposes to delete 

this provision because different 

processing methods for collateral types 

and associated timelines could render 

that statement inaccurate and the 

discussion of the collateral system’s 

capabilities likewise does not establish 

a stated policy, practice or 

interpretation and should not be 

considered a rule per se. The proposed 

revisions would clarify the description 

of OCC’s collateral management system 

in accordance with current OCC 

operations. 

In the Reconciliation section, OCC 

intends to clarify that the information it 

uses in the daily balancing of collateral 

against activity and inventory reports is 

not limited to end-of-day reports 

provided by custody banks and 

depositories. Accordingly, OCC 

proposes to remove the ‘‘end-of-day’’ 

modifier and include OCC’s internal 

systems within the description of 

potential sources of information and 

reports used for daily balancing activity. 

These revisions are intended to better 

reflect the sources of information OCC 

uses when conducting its daily 

balancing activity. 

The Reconciliation section also 

provides exceptions to the daily 

monitoring requirement concerning 

certain collateral for which OCC’s daily 

balancing activities previously were 

impractical. OCC believes these reviews 

and associated exceptions to the daily 

monitoring requirement are no longer 

necessary. Specifically, OCC would 

delete reference to the monthly reviews 

of collateral deposited pursuant to 

letters of credit or depository receipts 

and security agreements. With respect to 

letters of credit, the monthly reviews 

date to when documentation for such 

collateral was maintained in physical 

files. Currently, OCC verifies and 

electronically retains documentation for 

letters of credit on the date a letter of 

credit is processed consistent with the 

CRM Policy’s daily monitoring 

requirement, making the monthly 

review exception for letters of credit 

redundant and unnecessary. With 

respect to depository receipts and 

security agreements, the processing of 

Canadian Government securities, to 

which those monthly reviews apply, no 

longer rely on such documentation. In 

any event, Collateral Services conducts 

a daily inventory reconciliation of 

Canadian Government securities, which 

is reasonably and fairly implied by the 

generally applicable daily balancing 

requirement under the Reconciliation 

section, discussed above. Accordingly, 

OCC proposes to delete the reference to 

these monthly reviews from the CRM 

Policy because the monthly reviews no 

longer serve any practical purpose. 

Similarly, OCC proposes to remove 

the CRM Policy’s discussion of the 

requirement that Collateral Services 

regularly review escrow deposit banks 

to ensure acceptable and sufficient 

collateral is maintained. This review 

dates to a time when OCC did not have 

daily visibility into the actual collateral 

holdings held at the banks as supporting 

collateral.16 OCC would review a 

collateral listing supplied by the banks 

on a quarterly basis. Currently, all noncash collateral is pledged to OCC 

through the Depository Trust Company 

(‘‘DTC’’), which not only provides OCC 

with visibility into the holdings but 

allows OCC to validate and value the 

collateral in an automated fashion prior 

to giving credit to such deposits.17 OCC 

reconciles the non-cash inventory daily 

and performs a daily audit of any cash 

collateral maintained at the escrow 

banks against what OCC maintains in its 

systems. These daily reconciliation 

activities are reasonably and fairly 

implied by the generally applicable 

daily balancing requirement under the 

Reconciliation section, discussed above. 

The Reconciliation section also 

requires OCC’s Collateral Services team 

to ‘‘immediately address’’ any 

discrepancies identified during its 

activity reviews and inventory 

balancing. How Collateral Services 

addresses such discrepancies is 

addressed in procedures maintained by 

Collateral Services. OCC proposes to 

revise the text of this section to 

recognize that Collateral Services 

maintains procedures to satisfy this 

obligation. 

OCC proposes to remove the entirety 

of the Margin Offset section, which 

consists of a description of margin 

collateral assets that are permitted to 

directly offset cleared positions (i.e., 

deposits in lieu of margin) and a 

statement that cleared positions can be 

fully covered by such assets and thus 

excluded from margin calculations. OCC 

Rules 610 and 601(f)(2) authorize such 

offsets and describe the collateral assets 

permitted to be offset. As such, OCC 

believes it is unnecessary to duplicate 

this information in the CRM Policy. 

The Governance and Annual Review 

section provides that a recommendation 

to add a new collateral type for margin 

or clearing fund purposes must address 

whether the collateral should be subject 

to a haircut or modeled within the 

System for Theoretical Analysis and 

Numerical Simulation (‘‘STANS’’). OCC 

proposes to specify in the CRM Policy 

that when the collateral type will be 

subject to haircuts, such haircuts will be 

expressed as percentages, as is 

consistent with current OCC practice. 

In addition, OCC proposes to make 

clarifying, conforming and other nonsubstantive changes to the CRM Policy. 

The proposed changes discussed below 

would not substantively alter the 

meaning of the revised provisions or the 

substance or requirements of the CRM 

Policy as they relate to OCC’s core 

clearance, settlement, and risk 

management activities. The following 

conforming revisions are intended to 

align the text of the CRM Policy with 

existing provisions of the Rulebook, ByLaws or other documents, as applicable, 

and to update the titles of documents 

referenced in the CRM Policy: 

• In the section to be renamed as 

Policy Content, and again in the 

subsequent Margin section, OCC 

proposes to insert references to Rule 

610. Rule 610 establishes the rules 

around deposits in lieu of margin, 


ddrumheller on DSK120RN23PROD with NOTICES1
88166 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 

18See Exchange Act Release No. 91079 (Feb. 8, 

2021), 86 FR 9410 (Feb. 12, 2021) (SR–OCC–2020– 

016) (approving the establishment of the STANS 

Methodology Description). 

19CLRWG is a cross-functional group responsible 

for assisting OCC’s Management Committee in 

overseeing and governing OCC’s credit and 

liquidity risk management activities and currently 

consists of representatives from Financial Risk 

Management—including Credit Risk Management 

and Stress Testing and Liquidity Risk 

Management—Corporate Risk Management, 

Treasury, and Operations. 

20OCC’s Default Management Policy outlines the 

steps that OCC may take in the event of a Clearing 

Member’s suspension, including the close-out of 

positions. See Exchange Act Release No. 82310 

(Dec. 13, 2017), 82 FR 60265 (Dec. 19, 2017) (SR– 

OCC–2017–010). 

21See 17 CFR 39.13(g)(8)(i)(A). 

which are a form of margin collateral. 

These changes would ensure alignment 

between the text of the CRM Policy and 

the Rulebook with respect to acceptable 

forms of margin collateral. In the 

amended Policy Content section, OCC 

also proposes to add that Clearing Fund 

collateral can be used to meet OCC 

liquidity needs for settlement. This 

change is also consistent with existing 

practice, as codified in OCC Rule 

1006(f). 

• OCC would revise two references to 

chapter 2 of the ‘‘STANS Margin 

Methodology document’’ to instead refer 

to the ‘‘STANS Methodology 

Description,’’ which replaced the legacy 

STANS Margin Methodology as the 

description of the STANS Methodology 

filed with the Commission.18

The following clarifying revisions are 

intended to restate existing provisions 

for improved clarity and accuracy: 

• In the Purpose section, OCC 

proposes to replace collateral that ‘‘OCC 

has determined exhibits low credit, 

market and liquidity risks’’ with 

collateral that ‘‘is of low risk based on 

credit, market, and liquidity 

characteristics.’’ These revisions would 

not alter currently existing standards or 

practices but more clearly state what 

OCC’s definition of high quality 

collateral is based on. 

• In the Margin section, OCC 

proposes to replace ‘‘price’’ with 

‘‘value’’ in reference to the liquidation 

of margin assets at a price that 

reasonably approximates the value 

given to the asset as a collateral deposit, 

which would be consistent with the 

term ‘‘value’’ that is used later in the 

sentence. 

• In the Risk Considerations section, 

OCC proposes to insert the word 

‘‘collateral’’ after ‘‘margin’’ to align with 

the term ‘‘Clearing Fund collateral’’ 

used immediately thereafter. In light of 

this alignment, OCC also proposes to 

insert ‘‘or both’’ to make clear that the 

Credit and Liquidity Risk Working 

Group (‘‘CLRWG’’) 19 determines which 

assets are considered acceptable for 

each category of collateral, or both 

categories, as applicable. 

• In the Sovereign Credit Risk section, 

OCC proposes to delete ‘‘particular’’ as 

a qualifier preceding ‘‘foreign 

sovereign’s debt.’’ The qualifier is 

unnecessary as OCC reviews each form 

of collateral prior to accepting it as 

collateral, so the revision does not 

substantively alter the meaning of the 

provision. 

• In the Valuations section, OCC 

proposes to restate how the haircut 

determination and review process 

informs OCC’s approach to addressing 

procyclicality. The current policy states 

that such process also ‘‘protects against 

potential pro-cyclical concerns’’ by 

considering stressed market conditions. 

OCC proposes to delete ‘‘potential’’ and 

instead state that the process ‘‘shall also 

protect against pro-cyclical concerns’’ 

by considering stressed market 

conditions. The revisions would not 

substantively alter existing processes 

but make more definitive OCC’s intent 

to address pro-cyclicality through its 

existing haircut determination and 

review process. OCC proposes to 

remove ‘‘in order’’ from the same 

sentence as it is a redundant statement 

of OCC’s purpose, which is adequately 

reflected in the statement. 

• The Haircuts section provides that 

changes to applicable haircut rates shall 

be made in accordance with applicable 

authority under Rule 604. OCC proposes 

to delete ‘‘applicable authority under’’ 

Rule 604 as it is redundant in the 

context of this sentence. 

• The Collateral Re-hypothecation 

and Substitution section refers to 

‘‘Clearing Fund securities.’’ OCC 

proposes to revise the reference to 

‘‘Clearing Fund collateral’’ for greater 

consistency with the section header and 

discussion in the preceding sentence, 

which refers to rehypothecation of 

‘‘margin collateral.’’ 

Finally, OCC proposes to make 

typographical and administrative 

changes to the CRM Policy intended to 

correct spelling, capitalization, 

punctuation and grammar, remove 

unnecessary verbiage, and conform the 

CRM Policy’s format to OCC’s latest 

policy template. 

2. Margin Policy 

OCC proposes the following changes 

to the Margin Policy identified through 

its annual reviews of the policy. 

In the Purpose section of the Margin 

Policy, OCC proposes to delete ‘‘assure 

performance’’ of Clearing Members as a 

stated purpose for collecting margin. 

The act of collecting margin recognizes 

that no counterparty’s performance can 

be fully assured. The proposed revisions 

would merely clarify the discussion in 

the Margin Policy without any impact 

on the substance or requirements of 

OCC’s margin collection practices or 

Clearing Member obligations. 

OCC proposes to insert an 

Applicability and Scope section, which, 

similar to the change to the CRM Policy 

discussed above, would identify the 

primary OCC business units that 

support OCC’s approach to managing 

margin and credit exposure presented 

by its Clearing Members, including but 

not limited to P&M, Collateral Services, 

and QRM. 

In the Net/Gross Margining Accounts 

section, OCC proposes to revise the 

discussion of net and gross margining to 

focus on OCC’s calculation of margin 

rather than OCC’s approach to 

liquidating positions in the event of a 

default. The current text provides that 

two approaches under applicable 

regulations to liquidating a Clearing 

Member’s positions include the 

immediate liquidation of positions that 

are margined on a net omnibus basis 

and the porting of customer positions 

that are margined on a gross basis. OCC 

believes it would be more appropriate to 

frame this discussion in the Margin 

Policy in terms of margin calculation 

considerations rather than position 

liquidation considerations, which are 

covered in other OCC policies and 

procedures.20 Accordingly, OCC 

proposes to restate this section in terms 

of two approaches under applicable 

regulations for calculating margin, 

which include margining positions on a 

net omnibus basis and margining 

positions on a gross individual customer 

basis. The proposed revision would 

more accurately reflect the nature of the 

applicable regulatory provision while 

more clearly stating OCC’s approach to 

margin calculation in a manner that is 

consistent with its current operations 

and margin calculation processes. At the 

same time, OCC proposes to state in the 

Margin Policy that it calculates margin 

on a customer gross basis for select 

accounts, which facilitates the porting 

of futures Customer accounts in 

accordance with OCC’s Rules or ByLaws. The gross margin calculation is 

consistent with OCC’s current practice 

for customer segregated futures 

positions in accordance with U.S. 

Commodity Futures Trading 

Commission (‘‘CFTC’’) Regulation 

39.13(g)(8)(i)(A),21 which applies to 

OCC by virtue of its registration as a 

derivatives clearing organization 

(‘‘DCO’’). Lastly, OCC proposes to delete 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 88167 

22See OCC Rule 1106(c) (providing that OCC 

shall close open futures positions of a suspended 

Clearing Member in the most orderly manner 

practicable). 

23 17 CFR 39.13(g)(8)(i)(A). 24Because this margin calculation requirement is 

codified in a regulation it would be potentially 

confusing to continue stating that OCC margins 

customer futures accounts on a gross basis ‘‘to 

facilitate the porting of customers.’’ While this may 

be the intended outcome of the gross margin 

minimum requirement, it is more accurate that OCC 

collects the required amount primarily to meet its 

risk management obligations in accordance with 

applicable regulations. 

25See Exchange Act Release No. 90797 (Dec. 23, 

2020), 85 FR 86592, 86593 (Dec. 30, 2020) (SR– 

OCC–2020–014) (‘‘The [Third-Party Risk 

Management Framework] describes OCC’s 

framework for managing risk throughout the 

relationship lifecycle (i.e., at on-boarding, 

monitoring and off-boarding) for Clearing Members, 

Financial Institutions, and vendors.’’). 

a statement from this section indicating 

that the methodology used to liquidate 

a customer account directly influences 

the manner in which OCC margins the 

account. Liquidation methodology is but 

one of numerous factors (e.g., position 

risk, concentration of positions, 

correlations and offsets, and regulatory 

standards) influencing the manner in 

which an account is margined. Each of 

the above revisions would be consistent 

with OCC’s current operations and 

margin calculation processes. 

In the same section, OCC proposes to 

revise how it describes its approach to 

liquidating and/or porting a suspended 

Clearing Member’s accounts. The 

Margin Policy currently provides that 

OCC’s primary approach with respect to 

the positions of a suspended Clearing 

Member shall be immediate liquidation 

of net omnibus positions and porting of 

futures customer positions margined on 

a gross basis. The Margin Policy further 

specifies that accounts utilizing a net 

margining approach shall be liquidated 

on a net omnibus basis either through 

market transactions or an auction 

format. As above, OCC proposes to 

reframe the discussion in the Margin 

Policy to focus on the calculation of 

margin rather than considerations 

around liquidating positions, by noting 

instead that the calculation of margin on 

a net basis is consistent with OCC’s 

primary approach for liquidating a 

Clearing Member’s positions. In light of 

this revised focus on margin calculation 

rather than liquidation, OCC proposes to 

delete the statement regarding how net 

margin accounts will be liquidated. The 

proposed changes are intended to clarify 

the relationship between OCC’s margin 

calculation approach and its decisions 

to port or liquidate positions in a default 

scenario, in accordance with applicable 

regulations and OCC’s existing Rules.22

The same section provides that gross 

margining of accounts ‘‘shall permit’’ 

OCC to port individual customer 

accounts and associated margin to a 

solvent futures commission merchant 

(‘‘FCM’’). This text could be read to 

imply that gross margining ensures that 

OCC will be able to port individual 

customer accounts and associated 

margin in all cases, which cannot be 

guaranteed in advance. Accordingly, 

OCC proposes to revise this statement to 

instead focus on the effect of gross 

margining on OCC’s decision-making by 

clarifying that gross margining permits 

OCC to ‘‘identify’’ individual customer 

positions and margin deposits, which 

facilitates porting along with associated 

margin deposits. As provided in OCC 

Rule 1106 and implied by the proposed 

revision to this statement, and to further 

ensure that OCC retains an appropriate 

and necessary degree of flexibility to 

manage risk arising from a Clearing 

Member default, OCC further proposes 

to state that utilizing gross margining 

would not preclude OCC from 

liquidating those positions on a net 

basis. Each of these proposed revisions 

would align the discussion in the 

Margin Policy to be consistent with 

OCC’s currently contemplated approach 

to porting considerations as reflected in 

the Rules, and other policies and 

procedures governing OCC’s default 

management process, and would not 

alter the substance or requirements of 

the Margin Policy as they relate to 

OCC’s core clearance, settlement, and 

risk management activities. 

In the Segregated Futures Customer 

Gross Margining section, the Margin 

Policy provides that OCC margins 

customer segregated futures accounts on 

a gross margin basis to facilitate the 

porting of futures customers in the event 

of an FCM default. As noted above, the 

requirement to collect gross margin for 

customer futures accounts is established 

at CFTC Regulation 39.13(g)(8)(i)(A),23

which applies to OCC by virtue of its 

registration as a DCO. This is a 

requirement that applies to OCC by 

operation of law and does not need to 

be restated in the Margin Policy.24

Lastly, the statement could be 

interpreted to be contradictory to a later 

statement in the same section that OCC 

will require the larger of the gross or net 

margin requirement calculated for the 

account. For these reasons, OCC 

proposes to delete the statement in its 

entirety. 

In the Stock Loan Positions section, 

OCC proposes to revise its discussion of 

add-on charges for stock loan positions 

to enhance clarity. The Margin Policy 

currently provides that OCC will 

include add-on margin charges as 

needed based on pricing and corporate 

action conventions. Because there are 

not different conventions to how 

corporate actions are applied to stock 

loan contracts, OCC proposes to instead 

provide that add-on margin charges will 

be included based on pricing 

conventions and corporate action 

entitlements of the applicable stock loan 

program. OCC would remove the phrase 

‘‘as needed’’ from the current text since 

the relevant add-on margin charges are 

driven by the pricing conventions and 

cash entitlements of the program, 

making that phrase redundant in the 

context. The proposed revisions would 

update and clarify the description of 

OCC’s approach to add-on charges in 

the Margin Policy without impacting 

current OCC operations. In addition, 

OCC would change an ‘‘i.e.,’’ to ‘‘e.g.,’’ 

in the same section because the 

subsequent list of risk calculations is 

non-exhaustive. 

In the Cross-Margin section, OCC 

proposes to expressly state that margin 

requirements for cross-margin accounts 

shall be calculated in accordance with 

OCC’s margin methodology, while 

taking into account any provisions of 

the applicable cross-margin agreement. 

The revised text would conform with 

what is reflected in OCC Rule 704(a), 

which provides that margin in respect of 

cross-margin accounts shall be 

determined by OCC in accordance with 

that rule and the relevant cross-margin 

agreement. In a footnote to the same 

section, OCC notes that the 

establishment, implementation, 

maintenance and review of cross-margin 

agreements is governed by the rule-filed 

Third-Party Risk Management 

Framework 25 and a list of underlying 

procedures that support that 

Framework. OCC proposes to streamline 

this footnote by instead crossreferencing the ‘‘Third-Party Risk 

Management Framework and 

underlying procedures.’’ Reference to 

each of the underlying procedures was 

not intended to be a rule per se, and 

eliminating this information from the 

Margin Policy would encourage OCC 

staff to use OCC’s internal system of 

record to identify the procedures that 

are related to the specific purpose or 

function that they are performing 

instead of relying on a list that may be 

outdated or underinclusive. 

In the Collateral section, the Margin 

Policy states that margin deposits are 

due on ‘‘the morning’’ following the 

trade date. OCC proposes to amend 

reference to the generally applicable 

deadline, which could vary in certain 

circumstances (e.g., with respect to 

trades that clear on dates preceding a 


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26 15 U.S.C. 78s(b). 

27The MRWG is a cross-functional group 

responsible for assisting OCC’s Management 

Committee in overseeing and governing OCC’s 

model-related risk issues and currently consists of 

representatives from FRM, including QRM, and 

from Corporate Risk Management, including Model 

Risk Management. 

28See 17 CFR 240.17Ad–22(e)(6)(vi)(C) (requiring 

a clearing agency to conduct sensitivity analysis of 

its margin model and a review of its parameters and 

assumptions for backtesting more frequently than 

monthly during periods of time when the products 

cleared or markets served display high volatility or 

become less liquid, or when the size or 

concentration of positions held by the covered 

clearing agency’s participants increases or decreases 

significantly). 

29See supra notes 14–15 and accompanying text. 

30See Exchange Act Release No. 96113 (Oct. 20, 

2022), 87 FR 64824 (Oct. 26, 2022) (SR–OCC–2021– 

802) (SEC notice of no objection to OCC’s proposed 

adoption of cloud infrastructure for OCC’s new 

clearing, risk management, and data management 

applications). 

weekend or a bank holiday or where 

OCC issues an intra-day margin call). 

The reference would be updated to the 

‘‘morning of the business day’’ 

following the trade date, as provided by 

OCC Rule 601(a). The reference would 

be further updated to provide that with 

respect to intraday margin calls, margin 

deposits are due at such other time as 

provided by OCC Rule 609 and the 

section of the CRM Policy that addresses 

intra-day margin calls. The proposed 

revisions would update and clarify the 

description of OCC’s practices in the 

Margin Policy to better reflect a wider 

range of circumstances than are 

currently contemplated therein, and 

would not entail any changes to current 

OCC operations or margin collection 

practices. 

The Collateral in Margins section 

provides that OCC shall promote 

incentives to hedge by including certain 

forms of margin within the STANS 

margin calculation, as specified in 

referenced rules approved by the 

Commission pursuant to section 19(b) of 

the Exchange Act.26 OCC proposes to 

delete extraneous information regarding 

the content of OCC’s rules, including 

that OCC’s rules include scenarios that 

could impact Clearing Member 

exposures as a result of the collateral 

deposited. This information is implied 

by the beginning of the sentence, which 

explains that OCC intends to achieve 

the desired result by including margin 

collateral as specified in the referenced 

documents, and need not be duplicated 

in the Margin Policy. 

The same section currently requires 

QRM to perform an analysis, in 

accordance with referenced procedures, 

to confirm that risk interactions between 

derivative and cash market positions are 

being appropriately recognized. OCC 

proposes to update the reference to 

conform to the current name of the 

referenced procedures. In addition, to 

remove potential ambiguity regarding 

the scope of the required analysis, OCC 

proposes to specify that the analyses 

performed by QRM in accordance with 

the referenced procedures should 

confirm that the STANS margin model 

is effectively modeling the risk 

interactions. This addition would clarify 

that the Margin Policy requires QRM’s 

analyses to confirm the effectiveness of 

STANS’ modeling of the risk 

interactions, but does not establish a 

requirement that QRM separately 

confirm the appropriate recognition of 

risk interactions between derivative and 

cash markets outside of the STANS 

margin model. The scope of QRM’s 

obligation to confirm that risk 

interactions are being appropriately 

recognized in STANS is reasonably and 

fairly implied in the context of the 

paragraph, which discusses collateral 

that is included in STANS margin 

calculations, but OCC proposes to add 

specificity to enhance clarity regarding 

QRM’s obligations. 

In the Risk Factors section, OCC 

proposes to change the description of its 

evaluation of the appropriateness of risk 

factors considered within its models to 

strike ‘‘on an ongoing basis’’ and replace 

it with ‘‘on a regular basis.’’ That section 

lists several types of periodic reviews 

designed to achieve this aim, including 

reviews of Exchange proposals to list 

new products pursuant to referenced 

procedures, FRM’s daily backtesting, 

monthly reporting of such backtesting 

results to the Model Risk Working 

Group (‘‘MRWG’’),27 and QRM’s review 

of OCC’s margin methodology in 

accordance with referenced procedures 

to reasonably ensure that the margin 

methodology incorporates all significant 

risk factors and supports the robustness 

of OCC’s margin resources, which QRM 

performs monthly or more frequently as 

required by regulations applicable to 

OCC.28 In addition, as discussed 

elsewhere in the Margin Policy, OCC’s 

Model Risk Management business unit 

performs an annual review of the overall 

performance of the STANS margin 

methodology and its associated models. 

The periodicity of such reviews is 

discussed elsewhere in the Margin 

Policy. This revised text would be 

consistent with similar revisions noted 

above,29 as well as the timeline for 

periodic reviews of risk model 

performance conducted under 

applicable policies and procedures. The 

proposed rule change would not entail 

a change to current OCC operations. 

The same paragraph also provides 

that FRM shall continually evaluate the 

effectiveness of specified risk models. 

OCC proposes to delete the modifier 

‘‘continually’’ as it could be read to 

create an expectation that OCC conducts 

24/7 evaluations of its models. The 

revisions would only change the 

description of OCC’s practices in the 

Margin Policy to enhance consistency 

with regard to its current model 

performance review process and would 

not impact OCC operations. 

In the same section, OCC proposes to 

delete text indicating that QRM is 

responsible for reasonably ensuring that 

margin methodologies incentivize 

Clearing Members to be aware of their 

own risks and mitigate their exposures. 

One of QRM’s primary responsibilities, 

as discussed above, is to establish, 

implement, maintain and review margin 

methodologies to reasonably ensure that 

they incorporate all significant risk 

factors and support the robustness of 

OCC’s margin resources. The measure of 

any incentive effect from OCC’s margin 

methodology on Clearing Members’ 

awareness of risk or mitigation of 

exposures is inherently qualitative and 

falls outside of QRM’s ordinary remit. 

OCC further believes that well-designed 

margin methodologies would naturally 

support the creation of incentives at 

each Clearing Member to be aware of 

and mitigate their risks. Accordingly, 

OCC proposes to remove QRM’s 

responsibility to monitor indirect and 

qualitative effects of the methodology at 

third-party Clearing Members while 

retaining that team’s primary 

responsibilities with respect to 

quantitative aspects of margin model 

design, implementation, monitoring and 

review processes. 

The Market Data and Pricing 

Considerations section provides that 

P&M shall transmit pricing data to both 

OCC’s primary and back-up data 

centers, pursuant to a referenced 

procedure. OCC proposes to delete this 

operational detail with respect to OCC’s 

current data infrastructure from the 

Margin Policy. Changes in OCC’s data 

infrastructure could render that 

statement inaccurate and the reference 

to OCC’s current primary and back-up 

data centers is not intended to be a rule 

per se.30 In any event, the statement 

about transmission of data is reasonably 

and fairly implied by the existing text of 

the section, which provides that P&M 

shall review the quality and 

completeness of market data ‘‘prior to 

distribution [to] downstream systems 

and external consumers.’’ 

The same section also provides that 

OCC shall rely upon real-time market 

data in order to continually evaluate the 

value of Clearing Member portfolios. 


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31See Exchange Act Release No. 91079 (Feb. 8, 

2021), 86 FR 9410 (Feb. 12, 2021) (SR–OCC–2020– 

016) (approving the establishment of the STANS 

Methodology Description). 

32See id. 

33See Exchange Act Release No. 97439 (May 5, 

2023), 88 FR 30373, 30376 (May 11, 2023) (SR– 

OCC–2023–002) (approving amendments to OCC’s 

membership standards). 

34SPAN is a methodology developed by the 

Chicago Mercantile Exchange and used by many 

clearinghouses and exchanges around the world to 

calculate margin requirements on futures and 

options on futures. 

OCC proposes to remove the ‘‘real-time’’ 

qualifier for enhanced accuracy because 

other market data beyond real-time data 

is also relevant to OCC’s evaluation 

process. The proposed rule change 

would clarify that OCC may use 

intraday data. As above, the statement 

that OCC ‘‘continually’’ evaluates the 

value of portfolios could be read to 

imply that OCC values portfolios on a 

24/7 basis. OCC proposes to revise this 

statement to say that it evaluates 

portfolios ‘‘during market hours,’’ which 

OCC believes to be consistent with its 

regulatory and risk management 

obligations. These revisions are for 

clarification only and would not entail 

any changes to current OCC operations. 

The following paragraph in the same 

section provides that P&M shall 

systemically process and manually 

validate referenced settlement values in 

accordance with a referenced procedure. 

OCC proposes to delete ‘‘systemically’’ 

with regard to processing and 

‘‘manually’’ with regard to validations 

in order to provide OCC with an 

appropriate degree of flexibility in 

determining how it shall process and 

validate the referenced values. 

Operational details regarding the 

conduct of such processes and 

validations are contemplated in the 

referenced procedure. OCC believes it is 

unnecessary to duplicate those 

operational terms in the Margin Policy 

as doing so creates the risk of 

inaccuracy in the Margin Policy should 

the relevant processes be amended in 

the future in accordance with applicable 

governance requirements. The proposed 

revisions would remove from the 

Margin Policy constraints on the 

mechanical processes OCC could use to 

process and validate referenced 

settlement values, but would not 

significantly impact OCC’s core 

clearance, settlement or risk 

management activities. 

In the Recalibration section, OCC 

proposes to update the discussion of the 

recalibration process for STANS 

econometric models to reflect its 

automation. The revised text would 

provide that recalibrations are to be 

performed systemically as reflected in 

the current STANS Methodology 

Description.31 P&M would retain 

responsibility for monitoring outputs of 

the process and escalating issues and 

the stated timeline for the processing 

would not need to change. The 

proposed revisions would update the 

description of OCC’s mechanical 

process for recalibrations to reflect the 

automation of certain components, but 

would not otherwise impact its overall 

method for recalibrations or OCC’s core 

clearance, settlement, and risk 

management activities. 

In the same section, OCC proposes to 

add a footnote to explain that synthetic 

futures represent an exception to the 10- 

year lookback period for univariate 

parameters. This revision does not 

impact OCC’s operations as it merely 

conforms the discussion in the Margin 

Policy to be consistent with what is 

reflected in the STANS Methodology 

Description.32

The Stress Test Components section 

of the Margin Policy currently provides 

that FRM is required to continually 

evaluate the portion of stress losses that 

are not collected as margin against the 

Clearing Member’s net capital, in 

accordance with referenced procedures, 

and require the Clearing Member to 

deposit additional margin, in 

accordance with Rules 601 and 609, in 

an amount equal to the exposure in 

excess of its net capital where FRM 

determines that the uncollateralized 

exposure exceeds the Clearing Member’s 

ability to absorb the loss based on its 

current capitalization. For clarity, OCC 

proposes to add that OCC’s policy of 

calling for additional margin in such 

circumstances does not preclude OCC 

from taking other protective measures 

under OCC’s recently amended Rule 307 

if FRM determines a Clearing Member’s 

uncollateralized exposure presents 

elevated risk to OCC, including 

restrictions on distributions under Rule 

307A, restrictions on certain 

transactions, positions and activities 

under Rule 307B, and additional 

operational, personnel, financial 

resource and risk management 

requirements under Rule 307C.33

The SPAN section states that the 

System for Portfolio Analysis of Risk 

(‘‘SPAN’’) 34 is used to assess risk for a 

wide variety of financial instruments, 

including futures, options, physicals, 

equities or any combination thereof. 

OCC proposes to delete such 

informational background on SPAN’s 

capabilities as it is irrelevant to the 

discussion of how OCC uses SPAN to 

calculate margin requirements, which is 

the focus of this section, and OCC does 

not use SPAN to assess risk for all the 

instruments listed in that sentence. OCC 

also proposes to relocate a statement 

regarding OCC’s use of SPAN to 

compute gross margin for all segregated 

futures customers’ accounts within the 

paragraph in order to enhance clarity. 

OCC also proposes to revise the Scan 

Ranges section of the Margin Policy, 

which details certain functions related 

to the SPAN methodology. While this 

section accurately describes OCC’s use 

of scan ranges to establish margin 

covered under SPAN, OCC also 

performs recalibration of spread rates 

and other parameters under the SPAN 

methodology. For completeness, OCC 

proposes to specify parameters in 

addition to scan ranges that are used to 

calculate SPAN margin requirements. 

These changes would align the text of 

the Margin Policy with existing 

practices. OCC also proposes to delete 

the Scan Ranges section header in light 

of the expanded scope of parameters 

addressed thereunder. In the same 

section, OCC proposes to extend P&M’s 

recalibration responsibilities beyond 

scan ranges to include the additional 

parameters. These changes are 

reasonably and fairly implied by the 

SPAN section of the Margin Policy, 

which requires OCC to compute gross 

margin for all segregated futures 

customers’ accounts using SPAN. 

In the same section, OCC proposes to 

revise its description of maintenance 

and initial margin calculations. These 

proposed changes are descriptive only 

and would not substantively alter OCC’s 

margin calculation process or the ratio 

between the calculated amounts. This 

section currently provides that 

minimum scan ranges used to satisfy the 

initial speculator margin and spread 

rates shall exceed 110% of the 99% VaR 

of the daily historical observations. To 

enhance clarity around its initial and 

maintenance margin calculations and 

the ratio between the two values and 

update terminology with the latest 

conventions, OCC proposes to provide 

that the scan ranges established for the 

calculation of maintenance margin shall 

exceed the 99% VaR of the daily 

historical observations, and further 

provide that the scan ranges established 

for heightened risk profile margin 

calculations shall be at least 110% of 

that maintenance margin amount. These 

revisions only change the description of 

the two rates and the ratio between 

them to enhance clarity and are 

consistent with OCC’s current 

calculation practices for maintenance 


ddrumheller on DSK120RN23PROD with NOTICES1
88170 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 

35See Final Rule, Derivatives Clearing 

Organization General Provisions and Core 

Principles (Dec. 20, 2019), 85 FR 4800 (Jan. 27, 

2020) (amending CFTC Rule 39.13(g)(8)(ii)). 

36The term ‘‘Clearing Fund Draw’’ refers to an 

estimated stress loss exposure in excess of margin 

requirements. 

37See Exchange Act Release No. 83735 (July 27, 

2018), 83 FR 37855 (Aug. 2, 2018) (SR–OCC–2018– 

008) (amending Rule 609 related to intra-day 

margin). 

38See OCC Rule 601(c) (‘‘Notwithstanding any 

other provision of this Rule 601, [OCC] may fix the 

margin requirement for any account or any class of 

cleared contracts at such amount as it deems 

necessary or appropriate under the circumstances to 

protect the respective interests of Clearing 

Members, [OCC], and the public.’’) 

39See OCC Rule 609 (‘‘The Corporation may 

require the deposit of additional margin (‘intra-day 

margin’) by any Clearing Member in any account at 

any time during any business day to . . . protect 

[OCC], other Clearing Members or the general 

public.’’). 

40See OCC Risk Committee Charter, available at 

https://www.theocc.com/company-information/ 

documents-and-archives/board-charters (last 

revised May 26, 2022). 

and initial margin and the latest 

terminology used by the CFTC.35

In the same section, OCC proposes to 

add that inter-month spread charges, in 

addition to SPAN scan ranges, 

incorporate a long-run historical 

estimate or look to periods of 

heightened volatility to guard against 

pro-cyclicality. The added reference to 

‘‘inter-month spread charges’’ is 

consistent with OCC’s current process 

for calculating margin requirements 

under SPAN. OCC also proposes to add 

that the standard historical data lookback period used to establish scan 

ranges shall be ‘‘at least’’ 500 business 

days, except as provided in a referenced 

procedure. The addition of ‘‘at least’’ 

would be clarifying and would not 

impact OCC’s current approach to the 

SPAN margin calculations. OCC also 

proposes to remove ‘‘volatility’’ from the 

phrase ‘‘long-run historical volatility 

estimate,’’ which is only a textual 

change and would not impact OCC’s 

current approach to SPAN margin 

calculations. 

In the same section, OCC also 

proposes to remove the parenthetical 

example of unique risk characteristics 

attributable to particular products. The 

single example provided is not 

exhaustive and the referenced 

procedure includes additional detail 

regarding risk characteristics. 

Duplicating this information in the 

Margin Policy is unnecessary and 

creates the risk of inaccuracy in the 

Margin Policy should the relevant 

processes be amended in the future in 

accordance with applicable governance 

requirements. 

In the Intraday Margin Calls section, 

OCC proposes to change references to a 

‘‘window’’ for issuing margin calls to a 

‘‘standard time for processing’’, or 

similar term. This change would 

enhance the clarity of the discussion in 

the Margin Policy by adopting uniform, 

clear language to refer to margin calls 

issued during the standard processing 

timeline, without impacting OCC 

operations associated with issuing 

margin calls. 

In the Extended Trading Hours 

Margin Calls section, OCC proposes to 

insert a reference to a ‘‘standard time for 

processing’’ an extended trading hours 

margin call and provide that OCC will 

establish such standard time in the 

referenced procedure. The use of the 

‘‘standard time for processing’’ term is 

intended to align with the adoption of 

similar language in the immediately 

preceding Intraday Margin Calls section, 

as discussed above. The establishment 

of the deadline in a referenced 

procedure is consistent with and 

reasonably and fairly implied by OCC 

Rule 601(a), which authorizes OCC to 

specify the time by which Clearing 

Members are required to deposit margin 

with the Corporation. The proposed 

revision would not impact the 

operations of OCC as it relates to OCC’s 

core clearance, settlement, and risk 

management activities. In the same 

section OCC proposes to remove a 

reference to the 9:00 a.m. CT deadline 

for OCC to issue an extended trading 

hours margin call. Rule 601(a) 

authorizes OCC to specify the time by 

which every Clearing Member shall be 

obligated to deposit margin assets. OCC 

believes that reflecting such operational 

terms in the Margin Policy creates the 

risk of inaccuracy in OCC’s Margin 

Policy, which is filed as a rule with the 

Commission, should the specified 

deadline be amended or extended in 

accordance with applicable governance 

requirements. Accordingly, OCC has 

determined to remove the specific 

reference within OCC’s internal Margin 

Policy and instead refer to applicable 

procedures to establish the relevant 

timeline by which the margin call must 

be issued. OCC’s authority to amend or 

extend the deadline to deposit margin is 

fairly and reasonably implied by the text 

of Rule 601(a), and the proposed 

revisions would better enable OCC to 

give effect to this authority. 

The Holiday Margin Calls section 

requires OCC to issue holiday margin 

calls in specified amounts and 

circumstances. Currently, that section 

provides that when an account is 

subject to both a holiday and position 

risk margin call on the same day, OCC 

applies the larger of the two. 

Subsequent to the addition of this 

provision to the Margin Policy, OCC 

amended its rules to reflect Clearing 

Fund margin calls—that is, margin calls 

for a Clearing Member Group when an 

estimate of its Clearing Fund Draw 36

exceeds 75% of the amount of the 

current Clearing Fund.37 Pursuant to 

OCC’s authority under OCC Rules 

601(c) 38 and 609,39 it is OCC’s practice 

to issue a Clearing Fund margin call in 

situations where a Clearing Member is 

subject to these other types of margin 

calls and the Clearing Fund margin call 

is the largest of the three. OCC proposes 

to update the Margin Policy to reflect 

this practice. Specifying Clearing Fund 

calls as an additional category of margin 

call would align the discussion in the 

Margin Policy with the types of calls 

OCC issues today and would not entail 

a change to current OCC operations or 

margin collection processes. 

The Review of Margin Methodology 

section outlines Model Risk 

Management’s responsibilities for 

evaluating the overall performance of 

STANS at least annually, in accordance 

with referenced policies and 

procedures, and for reporting its 

findings to the Risk Committee, which 

is tasked with reviewing the adequacy 

of OCC’s margin and clearing fund 

methodology, including the STANS 

margin methodology, at least once every 

twelve months. OCC proposes to delete 

a duplicative reference in the Margin 

Policy regarding Model Risk 

Management’s obligation to produce an 

annual report of the STANS margin 

methodology, which is fairly and 

reasonably implied in the preceding 

sentence as well as the Risk Committee 

Charter.40 OCC also proposes to delete 

references to Model Risk Management’s 

obligations to present its validation 

findings and annual report of the 

STANS margin methodology to the Risk 

Committee. Model Risk Management is 

the primary group responsible for 

ensuring the completion of the annual 

validation, which it conducts in 

accordance with applicable procedures, 

and reporting of its findings. Because 

the requirement to validate STANS is 

established in OCC’s rules and 

applicable procedures establish how 

Model Risk Management plans and 

conducts its validation and reports any 

findings to the Risk Committee, OCC 

believes it is unnecessary to duplicate 

such details in the Margin Policy as 

doing so creates the risk of inaccuracy 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 88171 

41See Exchange Act Release No. 95842 (Sept. 20, 

2022), 87 FR 58409, 58419 (Sept. 26, 2022) (SR– 

OCC–2022–010) (proposing conforming changes to 

OCC’s risk management policies regarding the name 

of OCC’s Model Risk Management business unit). 

42 15 U.S.C. 78q–1. 

43 15 U.S.C. 78q–1(b)(3)(F). 

in the Margin Policy should the relevant 

requirements or processes be amended 

in the future in accordance with 

applicable governance requirements. 

Like the changes to the CRM Policy 

discussed above, OCC proposes to make 

clarifying, conforming and other nonsubstantive changes to the Margin 

Policy. The proposed changes discussed 

below would not substantively alter the 

meaning of the revised provisions or the 

substance or requirements of the Margin 

Policy as they relate to OCC’s core 

clearance, settlement, and risk 

management activities. The following 

conforming revisions are intended to 

align the text of the Margin Policy with 

existing provisions of the Rulebook, ByLaws or other documents, as applicable, 

and to update the titles of documents 

referenced in the Margin Policy: 

• The STANS section describes 

STANS as modeling the volatility of 

individual products and the correlation 

amongst products. OCC proposes to 

replace references to ‘‘products’’ in this 

sentence with references to ‘‘risk 

factors.’’ These proposed revisions 

would align references in the Margin 

Policy and the STANS Methodology 

Description without impacting OCC’s 

operations or risk management 

activities. 

• The Recalibration section provides 

that recalibrations will incorporate a 

long-run historical volatility estimate, 

which serves as a floor during periods 

of low market volatility to reduce procyclicality in OCC’s margin estimates. 

OCC proposes to replace ‘‘reduce’’ with 

‘‘control,’’ to more affirmatively state 

OCC’s intent in adopting volatility 

floors. 

• The Margin Policy currently 

contains references to certain related 

policies, procedures and other 

documents that OCC maintains in 

support of the Margin Policy. These 

documents are reviewed and updated 

on a periodic basis, which at times may 

result in the consolidation of certain 

related policies, procedures and 

documents or changes in their names. 

OCC proposes to revise the Margin 

Policy to update internal policy and 

procedure names to reflect any changes 

resulting from these periodic reviews to 

ensure the accuracy, consistency, and 

clarity of the Margin Policy. The 

proposed changes are administrative in 

nature and are not intended to change 

the substance of the Margin Policy. 

The following clarifying revisions are 

intended to restate existing provisions 

for improved clarity and accuracy: 

• In the Segregated Futures Customer 

Gross Margining section, OCC proposes 

to insert ‘‘for these accounts’’ to clarify 

that OCC will effect gross margining for 

customer segregated futures accounts. 

The revision is only intended to clarify 

the applicability of the statement. 

• In the Collateral in Margins section, 

OCC proposes to revise ‘‘certain forms 

of margin’’ within the STANS margin 

calculation to ‘‘certain forms of 

collateral’’ instead. This change is to 

enhance clarity in the description of 

OCC’s operations but does not change 

the meaning of the provision or OCC’s 

operations. The same section provides 

that OCC’s Management Committee 

shall be ultimately responsible for 

determining which types of collateral 

are included in STANS margin 

calculations. OCC proposes to remove 

‘‘ultimately’’ to enhance clarity, as the 

Management Committee’s authority to 

make such determinations derives from 

the Board, which implies that the Board 

has ‘‘ultimate’’ responsibility for such 

decisions. OCC also proposes to change 

a reference to ‘‘exchange traded fund[s]’’ 

in a parenthetical providing examples of 

deposits of collateral eligible for 

inclusion in STANS to ‘‘exchange 

traded product[s]’’ because collateral-inmargin treatment also extends to 

exchange traded notes. 

• In the Market Data and Pricing 

Considerations section, the Margin 

Policy establishes that P&M shall 

reasonably ensure that measures are 

taken to review the quality and 

completeness of market data prior to its 

distribution. OCC proposes to remove 

the qualifying language and establish 

that P&M is responsible for reviewing 

the quality and completeness of market 

data, as opposed to reasonably ensuring 

that measures are taken to review the 

data, prior to its distribution. This 

deletion would clarify P&M’s obligation 

for reviewing market data quality and 

completeness before it is distributed to 

downstream systems and external 

consumers. The proposed revision 

would add clarity to the Margin Policy 

and better ensure the integrity of market 

data at the critical stage prior to its 

downstream or external consumption. 

• In the Recalibration section, the 

Margin Policy provides that where P&M 

has ‘‘reasonable grounds for believing 

(e.g., with a newly created passive ETF 

tracking a longstanding index) that a 

suitable proxy exists,’’ such proxy may 

be used in place of the default 

distribution pursuant to the referenced 

procedure. OCC proposes to restate this 

section for additional clarity. The 

revised text would state that where P&M 

has ‘‘reasonable grounds for assigning a 

suitable proxy (e.g., a newly created 

passive ETF tracking a longstanding 

index),’’ such proxy may be used in 

place of the default distribution 

pursuant to the referenced procedure. 

These revisions would more clearly 

state P&M’s obligations as well as the 

circumstances in which P&M may 

exercise its discretion. In addition, OCC 

would amend a reference to the Model 

Risk Management business unit 

(formerly known as the Model 

Validation Group or ‘‘MVG’’) to reflect 

the current name of that department, 

consistent with changes that OCC made 

to other such references in a prior rule 

filing.41

• In the Add-on Charges section, the 

Margin Policy states that in some 

instances, exposures that may be 

modeled outside of STANS through the 

use of add-on charges may not require 

sophisticated models to be derived. OCC 

proposes to remove ‘‘in some instances’’ 

as it is implied by the beginning of the 

sentence, which states that these 

exposures ‘‘may’’ not require 

sophisticated models to be derived, as 

well as language in the next sentence 

referring to ‘‘other instances.’’ In 

addition, the Margin Policy states that 

consistent with the referenced 

procedure, MRWG has the discretion to 

recommend approval of add-on margin 

charges to the Management Committee. 

OCC proposes to delete the reference to 

MRWG’s discretion as it is implied by 

the language that MRWG ‘‘may’’ 

recommend approval. 

• In the Margin Monitoring section, 

OCC proposes to clarify that FRM 

conducts the backtests that are designed 

by QRM. This division of labor is 

implied in the preceding statements of 

that section and is appropriately 

reflected in the relevant procedures. 

Finally, OCC proposes to make 

typographical and administrative 

changes to the Margin Policy intended 

to correct spelling, punctuation and 

grammar and remove unnecessary 

verbiage in the Margin Policy. 

(2) Statutory Basis 

OCC believes the proposed rule 

change is consistent with Section 17A of 

the Act 42 and the rules thereunder 

applicable to OCC by improving the 

accuracy, clarity, and consistency of the 

OCC Policies so that they remain 

reasonably designed to achieve the 

standards and requirements thereunder. 

Section 17A(b)(3)(F) of the Act 43

requires, among other things, that the 

rules of a clearing agency be designed to 

promote the prompt and accurate 

clearance and settlement of securities 


ddrumheller on DSK120RN23PROD with NOTICES1
88172 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 

44 17 CFR 240.17Ad–22(e)(1). 

45 17 CFR 240.17Ad–22(e)(2). 

46 17 CFR 240.17Ad–22(e)(3). 

47 15 U.S.C. 78q–1(b)(3)(F). 

48 17 CFR 240.17Ad–22(e)(2). 

49 17 CFR 240.17Ad–22(e)(3). 

50 15 U.S.C. 78q–1(b)(3)(F). 

51 17 CFR 240.17Ad–22(e)(2). 

52 15 U.S.C. 78q–1(b)(3)(F). 

53 17 CFR 240.17Ad–22(e)(1). 

54 15 U.S.C. 78q–1(b)(3)(I). 

transactions and, to the extent 

applicable, derivative agreements, 

contracts, and transactions and to assure 

the safeguarding of securities and funds 

which are in the custody or control of 

the clearing or agency or for which it is 

responsible. In turn, Exchange Act Rule 

17Ad–22(e)(1) through (3) require OCC 

to maintain written policies and 

procedures reasonably designed to, 

among other things: 

• ensure a well-founded, clear, 

transparent, and enforceable legal basis 

for each aspect of OCC’s activities; 44

• provide for governance 

arrangements that are clear and 

transparent and specify clear and direct 

lines of responsibility; 45 and 

• maintain a risk management 

framework that includes policies, 

procedures and systems that are 

designed to manage risks and which are 

subject to periodic review and annual 

approval by the Board.46

OCC believes that the proposed 

changes, which are intended to better 

reflect current practices, remove 

extraneous information, and make other 

non-substantive, clarifying and 

administrative changes to the text of 

those policies, are consistent with the 

Exchange Act and these requirements 

for the following reasons. 

1. Update Descriptions To Better Align 

With Current Practices 

The proposed rule changes are 

designed to align the text of the OCC 

Policies with current practices and to 

otherwise enhance accuracy, clarity and 

consistency in the documents. The OCC 

Policies, including descriptions of 

practices and processes therein, are 

subject to periodic review. The 

proposed rule change would apply 

recommendations made as part of OCC’s 

annual review of the OCC Policies and 

which are intended to ensure the OCC 

Policies maintain accurate descriptions 

of OCC practices and operations. These 

changes are primarily clarifying in 

nature and would not significantly alter 

the substance or requirements of the 

OCC Policies as they relate to core 

clearing, settlement or risk management 

activities. OCC believes improving the 

clarity of the descriptions in the OCC 

Policies, which are central to OCC’s 

clearance and settlement activities, will, 

in turn, promote the accurate clearance 

and settlement of securities transactions 

and the safeguarding of securities and 

funds, in accordance with Section 

17A(b)(3)(F) of the Exchange Act.47

The proposed rule change would also 

update descriptions of processes and 

governance requirements in the OCC 

Policies to align with current practices 

and requirements. OCC believes these 

proposed revisions would thus support 

clarity in OCC’s governance 

arrangements and better ensure that 

OCC’s lines of responsibility are clear 

and direct, in accordance with Exchange 

Act Rule 17Ad–22(e)(2).48

The proposed rule change would 

apply updates to the OCC Policies that 

were recommended pursuant to annual 

reviews by the Board. The proposed 

revisions would not significantly impact 

the practices relating to OCC’s core 

clearance, settlement, and risk 

management activities. Accordingly, 

OCC believes the proposed rule changes 

would support its obligation to maintain 

a sound risk management framework 

that is subject to periodic review and 

annual approval by the Board in 

accordance with 17Ad–22(e)(3).49

2. Delete Extraneous Information 

The proposed rule change would 

remove extraneous information, 

including certain provisions that are 

substantively duplicative of provisions 

that are reasonably and fairly implied by 

other OCC rules or that do not 

independently meet the criteria of rules, 

stated policies, practices or 

interpretations. Certain provisions to be 

removed consist of background 

information that does not establish an 

OCC requirement or impact its 

practices. These proposed changes 

would enhance clarity by deleting 

provisions from the OCC Policies that 

do not create OCC obligations or 

substantively impact its practices or 

operations. Other provisions to be 

removed consist of text that duplicates 

provisions found in OCC’s By-Laws and 

Rules or other documentation filed with 

the Commission. OCC believes that it 

can avoid potential future confusion by 

removing from the OCC Policies 

information that is appropriately 

maintained in other documentation. 

Removing this information from the 

OCC Policies will eliminate 

inconsistencies that could arise from 

maintaining it in multiple places with 

different approval processes. 

Accordingly, OCC believes that removal 

of these extraneous provisions would 

facilitate the effective administration of 

OCC’s policies and procedures, which 

support the prompt and accurate 

clearance and settlement of securities 

transactions and the safeguarding of 

securities and funds, and thus is 

consistent with the requirements of 

Section 17A(b)(3)(F) of the Exchange 

Act.50 OCC also believes that removing 

these duplicative provisions from the 

OCC Policies would enhance clarity 

around OCC’s governance arrangements, 

better ensure clear and direct lines of 

responsibility and prioritize efficient 

governance processes for the relevant 

provisions, in accordance with the 

requirements of Exchange Act Rule 

17Ad–22(e)(2).51

3. Non-Substantive, Clarifying and 

Administrative Changes 

OCC proposes to make other nonsubstantive, clarifying and 

administrative changes to the OCC 

Policies to enhance their accuracy, 

clarity and consistency with other OCC 

rules. By correcting typographical 

errors, updating references to 

documentation, and conforming 

references with other documentation 

and descriptions, the proposed revisions 

would help facilitate the administration 

of existing rules that are intended to 

promote the prompt and accurate 

clearance and settlement of securities 

and derivatives transactions, in 

accordance with Section 17A(b)(3)(F) of 

the Exchange Act.52 In addition, 

correcting errors, making clarifications 

and conforming references and 

descriptions within the OCC Policies 

would improve their clarity, in 

accordance with the requirements of 

Exchange Act Rule 17Ad–22(e)(1).53

(B) Clearing Agency’s Statement on 

Burden on Competition 

Section 17A(b)(3)(I) of the Act 54

requires that the rules of a clearing 

agency not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. OCC does not 

believe that the proposed rule change 

would have any impact or impose a 

burden on competition. The proposed 

rule change is intended to update 

internal policies to better reflect OCC’s 

current practices, remove duplicative 

provisions that could result in overlap 

or inconsistencies with other OCC 

documentation and to make other 

administrative updates that would have 

no impact on Clearing Members or other 

market participants. None of the 

proposed updates to the OCC Policies 

would affect Clearing Members’ access 

to OCC’s services or impose any direct 

burdens on Clearing Members. 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Notices 88173 

55 15 U.S.C. 78s(b)(3)(A). 

56 17 CFR 240.19b–4(f). 

57Notwithstanding its immediate effectiveness, 

implementation of this rule change will be delayed 

until this change is deemed certified under CFTC 

Regulation 40.6. 

58 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Rule 1.5(n) (‘‘Member’’). The term 

‘‘Member’’ shall mean any registered broker or 

dealer that has been admitted to membership in the 

Exchange. A Member will have the status of a 

‘‘member’’ of the Exchange as that term is defined 

in Section 3(a)(3) of the Act. Membership may be 

granted to a sole proprietor, partnership, 

corporation, limited liability company or other 

organization which is a registered broker or dealer 

pursuant to Section 15 of the Act, and which has 

been approved by the Exchange. 

Accordingly, the proposed rule change 

would not unfairly inhibit access to 

OCC’s services or disadvantage or favor 

any particular user in relationship to 

another user. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments were not and are 

not intended to be solicited with respect 

to the proposed rule change, and none 

have been received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 55 and paragraph (f) of Rule 

19b–4 56 thereunder. At any time within 

60 days of the filing of the proposed rule 

change, the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

The proposal shall not take effect 

until all regulatory actions required 

with respect to the proposal are 

completed.57

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

OCC–2023–008 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–OCC–2023–008. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of OCC 

and on OCC’s website at https://

www.theocc.com/CompanyInformation/Documents-and-Archives/

By-Laws-and-Rules. Do not include 

personal identifiable information in 

submissions; you should submit only 

information that you wish to make 

available publicly. We may redact in 

part or withhold entirely from 

publication submitted material that is 

obscene or subject to copyright 

protection. 

All submissions should refer to file 

number SR–OCC–2023–008 and should 

be submitted on or before January 10, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.58

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–27912 Filed 12–19–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99182; File No. SR– 

CboeBZX–2023–097] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend Its 

Fee Schedule To Provide a Discount 

on the Purchase of Historical Equity 

Short Volume and Trade Reports 

December 14, 2023. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

1, 2023, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) proposes to 

amend its Fee Schedule. The text of the 

proposed rule change is provided in 

Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

equities/regulation/rule_filings/bzx/), at 

the Exchange’s Office of the Secretary, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to update its 

Fee Schedule to provide a discount on 

fees assessed to BZX Members 

(‘‘Members’’) 3 and non-Members that 

purchase $20,000 or more of U.S. Equity 

Short Volume and Trades Reports 

(‘‘Short Volume Reports’’), effective 


ddrumheller on DSK120RN23PROD with NOTICES1